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Business needs and potential solutions Survey report Research and Market Intelligence at BDC May 2018
Business needs and potential solutionsSurvey report
Research and Market Intelligence at BDC
May 2018
BDC – SME needs and potential solutions, May 2018 2
Methodology
01
Table of contents
Summary of results
02Detailed results
03
3
Methodology01.
BDC – SME needs and potential solutions, May 2018 4
Methodology
Survey methodology: Online.
Respondent profile: Business owners and business decision makers from BDC Viewpoints panel and
Maru/Matchbox (formerly Angus Reid) panel.
Survey dates: April 18 to 30, 2018.
Margin of error: The maximum margin of error for a probability sample of 865 respondents is ± 3.3 percentage
points, 19 times out of 20.*
Data processing and analysis were performed by the BDC Research and Market Intelligence team.
Weighting factors: Results were weighted by region and number of employees.
Data processing note: Unless otherwise mentioned, calculation bases exclude respondents who preferred not
to answer the question.
*As this survey is based on a non-probability sample, these numbers should be
interpreted with caution.
5
Summary of results
02.
BDC – SME needs and potential solutions, June 2018 6
Use of Financing and Advisory Products and Services
Term loan and advisory services are used most frequently: the larger the business, the more
products and services used.
The larger the business, the more likely to turn to formal sources of advice; smaller businesses
are more likely to turn to informal or self-service resources.
Opportunities, Obstacles to Success and Impactful Solutions
Respondents most frequently identified growth, innovation and market development as their
biggest opportunities. The main perceived obstacles to seizing opportunities are of financial
nature, particularly for smaller companies.
Finding skilled employees is seen as an impactful solution to their problems for most, but
especially for larger companies.
We opened our selection criteria. First, we look for motivated
people and then we train them. [...] This is the strategy we will take
for the future.
Summary of results
BDC – SME needs and potential solutions, June 2018 7
Ambition
About a third of respondents are self-claimed high achievers.
Business Transition
The larger the business, the greater the intentions to exit within 5 years. Among those who
intend to exit their business, about one-third intend to sell the company to external buyers.
On the other hand, interview participants told us that acquisition is often a necessary route to
growth, but it has many challenges.
Internationalization Activities
Exporting and importing are the most commonly reported activities. The larger the business,
the more likely to be active at the international level.
The United States remain the market in which Canadian businesses are most active. Larger
businesses are significantly more present in the different American markets, as well as in
Mexico.
What I would find useful is to have a roadmap of the different
steps I need to look into and identify what I need to do in order
to not miss anything.
Summary of results (cont.)
8
Main results03.
BDC – SME needs and potential solutions, May 2018 9
Term loan and advisory services are the most frequently used, overall.
Q.10 Have you used or do you intend to use the following services and types of financing?
41%
28%
37%
6%
15%
74%
24%
30%
49%
4%
18%
73%
Have used in the past 2 years
Intend to use in the next 2 years
Have not used nor intend to use
Have used in the past 2 years
Intend to use in the next 2 years
Have not used nor intend to use
Have used in the past 2 years
Intend to use in the next 2 years
Have not used nor intend to use
Have used in the past 2 years
Intend to use in the next 2 years
Have not used nor intend to use
Base: All respondents. Those who preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not equal to 100%.
Term loan(n=845)
Mezzanine financing, subordinate financing,
quasi-equity, growth equity(n=822)
Advisory services(n=834)
Venture capital(n=811)
Total use:61%
Total use:21%
Total use:48%
Total use:21%
BDC – SME needs and potential solutions, May 2018 10
Nearly half of the funding is used or will be used to finance tangible assets, but the proportion of intangible financing is not negligible.
Q.11 What did you finance or what do you intend to finance with this money?
Base: Those who have used or intend to use a term loan, mezzanine financing, subordinate financing, quasi equity or growth equity (n=577). Respondents who did not know or preferred not to answer were excluded from the calculation base.
47%
14%
39%
Tangible assets Intangible assets Both tangible and intangible assets
BDC – SME needs and potential solutions, May 2018 11
Almost 7 in 10 respondents say they are open to applying for financing online.
Q.12 Would you be open to making your request for financing online, instead of meeting in person with the representative of a financial institution?
Base: Those who intend to use a term loan, mezzanine financing, subordinate financing, quasi equity or growth equity (n=309). Respondents who preferred not to answer were excluded from the calculation base.
39%
30%
21%
10%
Yes, regardless of the amount needed Yes, but only if the amount was under $250K No Do not know
BDC – SME needs and potential solutions, May 2018 12
Respondents identified growth, innovation and market development, both at home and abroad, as their biggest opportunities.
Q.13 What is the biggest opportunity you see for your company?
Base: All respondents (n=693). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not equal to 100%.
31%
29%
14%
11%
6%
6%
5%
5%
Growth
Innovation
International expansion
Digital and technological transformationand innovation
Operations
Economy
Human Resources
Government and policy implementation
Specialize / Tap into high
growth-potential sectors (14%)
Diversification (10%)
New product/service
development (5%)
Grow and maintain customer
base (11%)
Sustain growth (6%)
Penetrate new markets (4%)
Increase competitiveness / grow
market share (4%)
Increase sales (4%)
BDC – SME needs and potential solutions, May 2018 13
The main perceived obstacles are of financial nature.
Q.14 What is preventing you from seizing [the biggest] opportunity [you see for your company]?
Base: Those who mentioned an opportunity for their company (n=693).
54%
51%
47%
43%
41%
41%
39%
37%
35%
34%
30%
31%
33%
33%
37%
43%
35%
38%
29%
44%
15%
14%
15%
21%
19%
14%
24%
23%
33%
19%
1%
4%
5%
3%
3%
3%
2%
2%
3%
2%
Access to working capital
Access to capital to pursue a growth strategy
Availability of the right contacts or partners
Access to capital to finance intangible assets (employee training,R&D, advertising and so on)
Availability of skilled workers
Operational capacity
Access to capital to finance tangible assets (equipment andmachinery, real estate and so on)
Availability of affordable workers
Access to capital to make an acquisition
Access to affordable expertise or knowledge
Prevents us Does not prevent us Not applicable Do not know
BDC – SME needs and potential solutions, May 2018 14
Strategic and planning challenges are less often named.
Q.14 What is preventing you from seizing [the biggest] opportunity [you see for your company]?
Base: Those who mentioned an opportunity for their company (n=693).
33%
29%
28%
27%
24%
22%
20%
20%
16%
14%
43%
52%
50%
40%
58%
53%
61%
57%
46%
57%
21%
16%
18%
27%
14%
24%
14%
20%
34%
28%
3%
3%
4%
6%
4%
1%
4%
3%
5%
1%
Ability to delegate to trustworthy people
Ability to develop a strong competitive advantage
Availability of the right information, expertise and knowledgewhen we need help
A high perceived level of risk
Ability to innovate and respond to the opportunity
Ability to develop new products and services
Ability to develop and execute a strategy and an action plan
Access to the right tools and/or technology
Ability to prepare for business transition
Availability of the right suppliers
Prevents us Does not prevent us Not applicable Do not know
BDC – SME needs and potential solutions, May 2018 15
54%
43%
42%
41%
37%
33%
33%
32%
29%
29%
17%
13%
15%
17%
36%
7%
6%
17%
7%
43%
6%
9%
8%
10%
7%
7%
7%
8%
7%
5%
7%
11%
10%
14%
13%
6%
5%
11%
5%
16%
16%
24%
24%
18%
7%
47%
49%
33%
52%
7%
Find highly qualified employees for added-value roles andresponsibilities
Access capital to expand capacity
Access capital to develop new products, services and/orprocesses
Access capital to invest in marketing and sales
Develop and execute effective marketing and sales plans
Access capital to acquire other companies
Acquire and integrate another company
Access capital to buy machinery or technology to improveproductivity
Access capital to expand into international markets
Develop and implement the company's overall strategy
High impact and very difficult to do High impact and easy to do Low impact and very difficult to do
Low impact and easy to do Not applicable
Finding skilled employees is seen as a solution for most.
Q.15 Here are some actions that could affect your business’s success. Place each of them in one of the following boxes.
Base: All respondents (n=853).
BDC – SME needs and potential solutions, May 2018 16
Other impactful actions are more diverse in nature.
Q.15 Here are some actions that could affect your business’s success. Place each of them in one of the following boxes.
Base: All respondents (n=853).
25%
25%
24%
24%
23%
23%
19%
19%
18%
14%
30%
13%
17%
16%
38%
13%
42%
15%
39%
13%
9%
6%
9%
7%
8%
8%
8%
11%
8%
11%
16%
5%
13%
4%
20%
14%
20%
33%
26%
11%
20%
51%
38%
49%
10%
43%
10%
22%
9%
52%
Use digital technologies to access new markets or modify yourbusiness model
Translate R&D investments into new products or services thatconsumers will buy
Prepare the business for transition
Identify and execute the right international growth strategy foryour company
Optimize operations and improve efficiency
Have an HR team and/or people with the skills needed toattract, develop and retain talent
Use technology to make the company more efficient
Find employees and workers for less specialized tasks androles
Make financial projections and manage cash flows
Identify and access cost-competitive suppliers in foreigncountries
High impact and very difficult to do High impact and easy to do Low impact and very difficult to do
Low impact and easy to do Not applicable
BDC – SME needs and potential solutions, May 2018 17
Generally speaking, the larger the business, the more likely to turn to formal sources of advice.
Q.16 When you need advice for your business, who do you turn to?
Base: All respondents. Those who preferred not to answer were excluded from the calculation base.
49%
40%
35%
32%
22%
13%
13%
8%
5%
34%
48%
46%
56%
51%
25%
43%
41%
37%
17%
12%
20%
12%
27%
62%
44%
51%
58%
Internal company resources (n=860)
Business and/or peer network (n=861)
Blogs, articles and/or any other printed or online content (n=863)
External accountant and/or lawyer (n=862)
Family and friends (n=862)
Advisory board (formal or informal) (n=854)
Business consultant (excluding accountant or lawyer) (n=859)
Bank (n=861)
Government agency (n=860)
Regularly From time to time Never
BDC – SME needs and potential solutions, May 2018 18
About a third of respondents have strong ambition.
Q.17 Operating a business involves hard work. However, people differ in terms of the trade-offs they are willing to make to succeed. To what extent do you agree with the following statements?
Base: All respondents. NOTE: Respondents with strong ambition are those who agreed (somewhat or strongly) with the three statements whereas respondents with low ambition disagreed (somewhat or strongly) with the three statements. Those who preferred not to answer were excluded from the calculation base.
4%
9%
34%
9%
22%
23%
34%
45%
26%
53%
24%
17%
I am willing to make personal sacrifices (e.g., more travel, longerhours) to maximize the revenues of my business (n=858)
I am constantly investing in new opportunities for my business,even at the risk of failure (n=855)
I want to become one of the top three global leaders in my sub-sector and I am willing to do whatever it takes to achieve this
(n=828)
Strongly disagree Somewhat disagree Somewhat agree Strongly agree
Respondents with strong ambition:
32%
Respondents with low ambition:
6%
BDC – SME needs and potential solutions, May 2018 19
Only half of respondents say they will not exit their business within 5 years.
Q.18 Will you be exiting your company in the next five years?
Base: Q.18 = All respondents (n=857). Those who preferred not to answer were excluded from the calculation base. Q.19 = those who will exit their business in 5 years (n=215). Q.20= those who will not exit their business in 5 years (n=418). For Q.19 and Q.20: Those who did not know or preferred not to answer were excluded from the calculation base.
23%
51%
26%
Yes
No
Do not know
Yes
No
Q.19 What type of transition plan do you have?
37%
19%
15%
15%
15%
Sale to external buyers
Family transition
Management or employeebuyout
Wind down of the business
No plan in place
25%
75%
Yes
No
Q.20 Do you have a transition plan?
BDC – SME needs and potential solutions, May 2018 20
The larger the business, the more likely to be active at the international level.
Q.22 What internationalization initiatives are you already carrying out?
Base: Q.22 = All respondents (n=852). Those who preferred not to answer were excluded from the calculation base. Q.23 = respondents who pursue international activities (n=376). Those who did not know or preferred not to answer were excluded from the calculation base.
Q.23 In which markets do you operate?
61%
53%
53%
28%
21%
20%
17%
13%
12%
12%
10%
9%
9%
7%
7%
4%
United States (East)
United States (West)
United States (Central)
Western Europe
United Kingdom
China
Asia (other than China)
Mexico
South America
Middle East
Eastern Europe
Africa
Oceania
Central America
Scandinavia
Caribbean
Average percentage of annual sales that comes
from international activities:
33%
26%
25%
19%
6%
55%
Exporting
Importing
Foreign alliances andpartnerships
Direct investment outsideCanada
None of the above
Active
BDC – SME needs and potential solutions, May 2018 21
Over half of the companies in identified sectors focus on businesses at large (B2B segment).
Q.21 What sectors of the economy does your company primarily focus on?
Base: Respondents in these sectors: information and cultural industries; manufacturing; and other services (except public administration) (n=194). Those who preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not equal to 100%.
56%
27%
17%
17%
11%
10%
8%
8%
8%
7%
5%
3%
Businesses at large
Consumers at large
Machinery and industrial equipment
Engineering and construction
Health care and health sciences
Automotive and motor vehicles
Food and beverage
Aerospace and defence
Clean tech
Transportation, logistics andwarehousing
Tourism and recreation
Not-for-profit and professionalorganizations
22
Respondent profile
04.
BDC – SME needs and potential solutions, May 2018 23
B.C. and North
16%
Prairies
21%
Ontario
36%
Quebec
20%
Atlantic
7%
Base: All respondents (n=865).
Region
BDC – SME needs and potential solutions, May 2018 24
Number of employees and company’s age
56%
15%
16%
8%
3%
1%
1%
18%
21%
15%
21%
25%
1 to 4 employees
5 to 9 employees
10 to 19 employees
20 to 49 employees
50 to 99 employees
100 to 199 employees
200 employees and over
Less than 5 years
5 to 9 years
10 to 14 years
15 to 24 years
25 years and over
NU
MB
ER
OF
EM
PL
OY
EE
SC
OM
PA
NY
’S A
GE
Base: All respondents (n=865).
BDC – SME needs and potential solutions, May 2018 25
Sector of activity
22%
14%
12%
8%
6%
5%
5%
5%
5%
4%
3%
Professional, scientific and technical services
Manufacturing
Retail trade
Construction
Other services (except public administration)
Finance, insurance, real estate and leasing
Information and cultural industries
Wholesale trade
Arts, entertainment and recreation
Agriculture, forestry, fishing and hunting
Accommodation and food services
Base: All respondents (n=865). Only sectors with a minimum of 3% of respondents are shown.
SE
CT
OR
OF
AC
TIV
ITY
BDC – SME needs and potential solutions, May 2018 26
Business annual sales
32%
18%
12%
12%
7%
7%
6%
6%
Up to $249,999
$250,000 to $499,999
$500,000 to $999,999
$1 million to $1,999,999
$2 million to $2,999,999
$3 million to $4,999,999
$5 million to $9,999,999
$10 million and over
AN
NU
AL
SA
LE
S
Base: All respondents (n=865).
BDC – SME needs and potential solutions, May 2018 27
26%
29%
18%
13%
14%
1%
Negative or 0%
From 0.1% to 4.9% per year
From 5% to 9.9% per year
From 10% to 19.9% per year
20% or more per year
The business did not exist last year
Business annual sales growthA
NN
UA
L G
RO
WT
H
Base: All respondents (n=865).
BDC – SME needs and potential solutions, May 2018 28
Respondent’s position in company
83%
45%
20%
18%
17%
15%
15%
5%
Owner
Chief Executive Officer/President
General Manager
Chief Financial Officer
Head of strategy
Chief Marketing Officer, or head of marketing or sales
Chief Operating Officer
Other
PO
SIT
ION
Base: All respondents (n=865). Note: for the position question, multiple mentions were allowed, therefore total may exceed 100%.
BDC – SME needs and potential solutions, May 2018 29
Owners’ average age and ownership by gender
4%
17%
34%
33%
12%
1%
40%
32%
13%
11%
2%
3%
Less than 35 years old
35 to 44 years old
45 to 54 years old
55 to 64 years old
65 years old and over
Don't know/Prefer not to answer
By men only
By men and women in equal proportions
By women only
Mostly by men
Mostly by women
I prefer not to answer
OW
NE
R’S
AG
EO
WN
ER
SH
IP
Base: All respondents (n=865).
Thank you.
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